Not every stock is in a bubble. Here’s how to find today’s bargains and tomorrow’s winners

MarketWatch2021-08-27

Look for high-quality companies, one stock at a time AGENCE FRANCE-PRESSE/GETTY IMAGES The stock market is in a bubble; this is not a secret. Most investors are ignoring it and just infatuated with ...

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Comments

ba2blcksheep
2021-08-29
ba2blcksheep
agree
Jojolee
2021-08-28
Jojolee
Excellent article
JohnL
2021-08-28
JohnL
Nice
tkj
2021-08-28
tkj
Hmm...when he talked about the fool and the bigger fool, I am wondering whether he is referring to the Motley Fool who has been hailing hundreds and thousands of stock price growth....Good analysis on the dilemma faced by people staying at the sideline but I was disappointed that they did not share which are the stocks that are trading 60 cents to the dollar...
FrickL
2021-08-28
FrickL
It’s always a gamble …
- JohnL:
  Indeed
- GeneV:
  ??
replaygoh
2021-08-28
replaygoh
noted

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Most investors are ignoring it and just infatuated with the ride. They are playing “Fool’s Gambit” —waiting for a greater fool to buy their overvalued stock from them. And why not, greater fools have been showing up in droves for years. Low interest rates inflated the prices of all assets, forcing everyone to take greater and greater risks.\nThen there is pure, unadulterated greed. This market bubble is filled with this “get rich fast” attitude and the fear of missing out; all bubbles are. This time the market has been further deformed by social media, which seems like an enormous amplifier and arguably prolonger of that behavior, bringing what seems an endless supply of incremental buyers (bigger fools).\nMarket timer’s gambit\nRational people not drunk on greed, who are fine with getting rich slowly, may want to avoid this market altogether.  They may play “Market Timer’s Gambit.” Their argument (on the surface) is logical. It goes like this: “I am going to stay on the sidelines for now and will go in after the market dips”.\nThere are two problems with this strategy. First, market irrationality can last a long time. Second, though it sounds good in theory, in practice it is difficult to execute.\nHere is an example: Let’s say you went 100% in cash waiting for the market to correct. You waited for a long time and then the market declines 10%. You feel slightly vindicated, but the market really just settled to where it was a few months ago. You have a decision to make: Get in or wait? You are of course prudent, and the market is declining, so you decide to wait.\nThe market falls another 10%. You feel a bit more vindicated. Now you feel rewarded for your patience and for the last few years of return you’ve missed out on. But your gut tells you if the market declined 20% and it can go down lower. You wait.\nYou were right. The market declines another 10%. Economic news is ugly. The market decline may send the economy into a recession. Or the economy is already in a recession. Now you are worried. You decide to wait.\nThe market declines another 10%. This cash now feels so dear you don’t want to part with it. You feel like you’ve got this figured out. You tell yourself you’ll invest when the news gets better.\nThe news is not getting better. But a strange thing happens. The market has a few strong days. Commentators call them a “dead cat bounce,” expecting further declines. These few strong days are followed by a few more.  Suddenly the market has retraced the last 20% of the decline. You feel bad that you didn’t invest two weeks ago (at the now “obvious”) bottom.\nYou get the point. Once you are completely out of the market, it is incredibly difficult psychologically to dive back in. I’ve met quite a few people that have stayed out of the market since 2000 and are still waiting for their chance to get in. Just imagine the psychological rollercoaster they went through and the returns they left on the table.\nEven if you got the market timing right once, putting it into a repeatable process is impossible. In addition to getting the timing of the economy right, you have to time the stock market response to the economy. I know many people who timed the market successfully once; I don’t know any who’ve done it twice.\nOne stock at a time\nInvesting in the stock market doesn’t need to reside in the extremes of the Fool’s Gambit or the Market Timer’s Gambit. There is a different game available: “One Stock at a Time.”\nEven in this insanely overvalued market not all stocks are overvalued and in search of a greater fool. Armed with patience, a long-term time horizon and our time-tested value investing process, look for high-quality companies, run by great management, that are significantly undervalued (i.e., have a margin of safety).\nThis process is not fast and furious and won’t get you rich quickly. It requires mundane work and turning over a lot of rocks. At our firm, we read company financial filings, talk to management, competitors, build our own financial models, debate these investments among ourselves and with our global network of investors.\nInvestors can choose from tens of thousands of stocks globally. At our firm, we need only 20 to 30. When we cannot find enough stocks that meet our stringent investment criteria our cash balances go up, then decline as we find new stocks. We don’t time the market; we value individual stocks, buying when they are cheap and selling when they are dear.\nTo sum it up: The U.S. stock market today is a dollar bill trading for close to $2 or more. Many stocks are $1 changing hands for $4, $6, $20. But we don’t own the market; instead we have assembled a portfolio of companies priced attractively at 30- to 60-cents on the dollar — one stock at a time.","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":813634935,"gmtCreate":1630196678927,"gmtModify":1676530239947,"author":{"id":"4091367214252370","authorId":"4091367214252370","name":"ba2blcksheep","avatar":"https://static.tigerbbs.com/0f415c93d67440eac8b616c14a4e6b2b","vip":1,"crmLevel":1,"crmLevelSwitch":0},"htmlText":"agree","listText":"agree","text":"agree","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/813634935","repostId":1149850459,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":813382067,"gmtCreate":1630131941359,"gmtModify":1676530232673,"author":{"id":"4091616308316100","authorId":"4091616308316100","name":"Jojolee","avatar":"https://static.tigerbbs.com/ff6364fb264c8c37a640e64bbb6dcf38","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"Excellent article","listText":"Excellent article","text":"Excellent article","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/813382067","repostId":1149850459,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":813924832,"gmtCreate":1630123437926,"gmtModify":1676530230748,"author":{"id":"3570369418287680","authorId":"3570369418287680","name":"JohnL","avatar":"https://community-static.tradeup.com/news/20db2fa4f65cb04a8d837d400a1b5d7b","vip":1,"crmLevel":5,"crmLevelSwitch":1},"htmlText":"Nice","listText":"Nice","text":"Nice","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/813924832","repostId":1149850459,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":819771262,"gmtCreate":1630111012156,"gmtModify":1676530226162,"author":{"id":"3582020830270271","authorId":"3582020830270271","name":"tkj","avatar":"https://static.tigerbbs.com/b4db3635974ce189ed8129eca6b5b618","vip":1,"crmLevel":4,"crmLevelSwitch":0},"htmlText":"Hmm...when he talked about the fool and the bigger fool, I am wondering whether he is referring to the Motley Fool who has been hailing hundreds and thousands of stock price growth....Good analysis on the dilemma faced by people staying at the sideline but I was disappointed that they did not share which are the stocks that are trading 60 cents to the dollar...","listText":"Hmm...when he talked about the fool and the bigger fool, I am wondering whether he is referring to the Motley Fool who has been hailing hundreds and thousands of stock price growth....Good analysis on the dilemma faced by people staying at the sideline but I was disappointed that they did not share which are the stocks that are trading 60 cents to the dollar...","text":"Hmm...when he talked about the fool and the bigger fool, I am wondering whether he is referring to the Motley Fool who has been hailing hundreds and thousands of stock price growth....Good analysis on the dilemma faced by people staying at the sideline but I was disappointed that they did not share which are the stocks that are trading 60 cents to the dollar...","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/819771262","repostId":1149850459,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":819474706,"gmtCreate":1630104342505,"gmtModify":1676530223745,"author":{"id":"3582151718585472","authorId":"3582151718585472","name":"FrickL","avatar":"https://community-static.tradeup.com/news/5ea265fa5b5f17bb783942b290d93a0d","vip":1,"crmLevel":6,"crmLevelSwitch":0},"htmlText":"It’s always a gamble …","listText":"It’s always a gamble …","text":"It’s always a gamble …","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":2,"repostSize":0,"link":"https://ttm.financial/post/819474706","repostId":1149850459,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":5674228,"gmtCreate":1630123450021,"gmtModify":1663233025127,"authorId":3570369418287680,"author":{"id":3570369418287680,"authorId":3570369418287680,"name":"JohnL","avatar":"https://community-static.tradeup.com/news/20db2fa4f65cb04a8d837d400a1b5d7b","vip":1,"currentWearingBadge":{"badgeId":"cbe1c45c584340f3bd9ae6c77e0e9981-1","templateUuid":"cbe1c45c584340f3bd9ae6c77e0e9981","name":"Academy Experiencer","description":"5 lessons 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